Department of Management Studies

UNIT 1 - Introduction to Services Marketing: Scope and Definition- Services Marketing

Environment- Definition- Goods and Services- Components of Service- Characteristics-
Service Delivery as a System- Service Facility Design and Layout- HRM Issues- -Building
Services Aspirations- Tracking Customer Behaviour-.

Definition:
According to Philip Kotler and Bloom services is defined as “any activity or
benefit that one party can offer to another that is essentially intangible and does not result in the
ownership of anything. Its production may or may not be tied to a physical product.”

TYPES OF SERVICES

A service consists with two product element to perform it function. They are: 

1. Core Services: A service that is the primary purpose of the transaction. Eg: a
haircut or the services of lawyer or teacher.

2. Supplementary Services: Services that are rendered as a corollary to the sale

of a tangible product. Eg: Home delivery options offered by restaurants above a
minimum bill value.

 Facilitating services: (sometimes called delivery services): Facilitate the delivery and

consumption of the core service (are essential to delivery) (e.g. information provision,
order-taking, billing, payment methods)

 Supporting services: support the core and could be eliminated without destabilising the
core.
The distinction between supplementary and facilitating services varies,
depending on the nature of the service. For instance, the provision of coffee and tea would
be considered a supporting service in a bank, but would be a facilitating service in a bed and
breakfast facility. Whether an element is classified as facilitating or supporting depends on
the context.

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DIFFERENCE BETWEEN GOODS AND SERVICES

Given below are the fundamental differences between physical goods and services:

S.No. Basis Goods Services

1 Physical Shape Tangible Intangible
2 Storage Can be stored Cannot be stored
Production and distribution are Production, distribution and
3 Production and Delivery separation from their consumption are simultaneous
consumption processes
4 Customer Involvement Low/ Absent High
5 Customer Reaction Delayed Spontaneous
Transfer of ownership is Transfer of ownership is not
6 Ownership
possible possible
Varies with person to person.
7 Quality Standardised Quality is based on the
customer priority.
8 Pricing Material Base Customer Base
9 Repairs Common Impossible
10 Replacement Common Rare
11 Channels of Distribution Longer in most cases Shorter
Only Physical product plays a
12 Product Design Environment plays a vital role
vital role.

SCOPE OF SERVICE MARKETING

 
A service business is one where the perceived value of the offering to the
buyer is determined more by the service rendered than the product offered. In this way the
nature and scope of services pose different challenges for managers in service businesses. Such
businesses include those that provide an almost entirely intangible offering, such as legal
services, health care and cleaning services and businesses that offer both services and products
such as restaurants and retail outlets.
 Service as an organization
 Service as core product
 Service as product augmentation
 Service as product support
 Service as an act
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 Service as an organization: It is the entire business or not-for-profit structure that resides

within the service sector. For example, a restaurant, insurance company, a charity.

 Service as core product: The commercial outputs of a service organization such as a

bank account, an insurance policy or mobile networks like Airtel, Idea etc.

 Service as product augmentation: any peripheral activity designed to enhance the delivery
of a core product. For example, provision of a courtesy care, complimentary coffee at the
hairdresser.

 Service as product support: Any product or customer-oriented activity that takes place after
the point of delivery. For example, monitoring activities, a repair service, up-dating
facilities.

 Service as an Act: Service as an act that is service as a mode of behaviour such as helping
out and giving advice.
  However from a market or consumer point of view the relative importance of
different components of the service offering can range vastly from one customer to another. So a
service must be considered from the point of view of many types of customers. For example, two
people may pay the same amount for a service but may be paying for different aspects of the
service. A business person may dine regularly in an expensive, upmarket restaurant because of the
convenience to their place of work and the perceived status of entertaining guests there. Other
customers of the same restaurant may eat there regularly because of the excellent food, modern
décor and menu choice.

SERVICES MARKETING ENVIRONMENT

Definition:
“The environment in which the services are delivered and where the firm and
customer interact is called as services marketing environment.”

Service environment refers to the physical backdrop that surrounds the

service. For example, when we see a movie of our choice, the element of enjoyment comes
from the surroundings such as cleanliness of the premise, comfortable seats, and a spacious
parking lot. Naturally, the environment has an important impact on the service experience. The
service environment can also signal the intended market segment and position the organization.

For example, a hotel near a college campus might signal that it is catering to
students by putting attractive pictures on the walls. A car dealer might use it service
environment to position itself as upscale by decorating its showroom and providing snacks in a
tasteful and elegant manner. There are three elements that can be manipulated in the service
environment:
i. The Ambient Conditions
ii. The Spatial Layout; and
iii. The Signs and Symbols
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i.  The Ambient Conditions: Ambient conditions include background characteristics of the

environment such as temperature, lighting, noise, music, scent, and colour. All of these
factors can profoundly affect how people feel, think, and respond to a
particular service establishment.

ii. The Spatial Layout: It refers to the floor plan, size and shape of furnishings, counters, and
potential machinery and equipment, and the ways in which they are arranged.

iii. The Signs and Symbols: Signs, symbols and artefacts refer to a broader category of objects
that serve multiple purposes. Signs and symbol refer to physical signals that provide cues for
directional purposes, provide information about appropriate behaviour within a store or
services cape and may also serve a symbolic role. Some signs perform rudimentary roles
such as providing directions for navigation through a space while other more complex signs
that communicate through shared meaning systems.

COMPONENTS OF SERVICE
Generally, physical goods alone rarely satisfy the customer’s needs. The
market has to find out the needs of the customers, whether they are being met, and how to meet
them better. For this, today, the marketer requires to meet the customer needs and make him to
stay by providing intangible services. Thus, it is imperative that the services marketing do not
just refer to the advertising and selling of services, rather it is a kind of managerial approach
ensuring that the organisation’s offering are serving customer needs-whether it sells telephone
service or dump trucks. The intangible components of a product are a key element in winning
and maintaining a satisfied customer. There are four essential components in services. They are
as follows:

1. The Physical Product: The Physical product provided by the firm is tangible and
physically real. Examples include houses, automobiles, computers, books, soap and
shampoo, and food. The service and the product are customer-oriented. The marketing
managers and engineers work towards a common goal of meeting customer needs. By
linking engineering design features to specific customer needs, the product’s value to
customers is improved.

2. The Service Product: It refers to the core performance that is purchased by the customer. In
addition to the transfer of physical goods it includes interactions with the firm’s personnel.
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For example – Maruthi Udyog. The cars come with strong service guarantees, and dealer
personnel are trained and empowered to make exceptional efforts to keep customers happy
and solve their problems. All of these aspects of the firm’s interaction with customers must
be planned, and they help determine the nature of the overall service experience.

3. The Service Environment: It refers to the physical backdrop that surrounds the service. For
example, when we see a movie of our choice, the element of enjoyment comes from the
surroundings such as cleanliness of the premise, comfortable seats, and a spacious parking
lot. The service environment can also signal the intended market segment and position the
organisation.

4. The Service Delivery: It refers to what actually happen when customers avail the service.
According to Roland.T.Rust, the service product defines how the service works in theory,
but the service delivery is how the service works in actual practice. We often hear the adage,
“Plan Your Work, and Work Your Plan”. The service product is the result of “planning your
work”, and the service delivery is the result of “working your plan”.

Examples of four components of a service for several large industries

Physical Product Service Product Service Environment Service Delivery
Industry
(i) (ii) (iii) (iv)
Providing test
Automobil Ownership  Showroom with drive facility,
The Car/bike
e transfer vehicle accessories Repair facility
Negotiation.
Teaching
 Lecture rooms,
University Degree Certificate Information performance,
 Library.
Lending Books.

CHARACTERISTICS OF SERVICE

There are characteristics of services that differentiate it from a product (tangible good):

 Intangibility
 Inseparability
 Variability
 Perish-ability
 Lack of ownership and transferability

1. Intangibility – Services are intangible offerings. A buyer cannot see, hear, feel or taste a
service unless it is bought. A person who pays for a massage will not see the effects of
massage till the time the massage is done on his/ her body. Similarly, a person who wants to
travel to a foreign country by air will have to buy a ticket for an airline as well as board the
plane to travel and experience the flight.

2. Inseparability – There is inseparability of the service provided and the buyer. In the case of
marketing of goods, production and distribution need not be done at the same time. But in
the marketing of most services, both production and distribution will have to be done

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simultaneously. For example a doctor cannot render his/ her services without patient
participation.

3. Heterogeneity/ Variability – This is another characteristic of services that differs from the
tangible products. The service provided by the same provider cannot be standardized. The
way a service is provided differs from day-to-day or from customer-to-customer.

For example, an air travel for the second time from the same airline will not
give the same experience that a person received during the first flight. A barber may not
provide a consistent haircut to all individuals depending on time constraints by the clients,
etc.

4. Perish-ability – A service cannot be stored. The goods if not sold today can be stored,
preserved for further selling. But in the context of services, if we fail to sell the services, it is
lost only not for today but even for the future. If a labour stops to work, if a seat in the
aircraft remains unsold, if a bedroom in a hotel remains unbooked, a chair in a cinema hall
remains vacant; we find the business non-existent and the opportunities are lost and lost
forever.

5. Lack of ownership and transferability – The goods sold are transferred from one place to
another, the ownership is also transferred and this provides to the buyers an opportunity to
resell. In the case of services, we don’t find the same thing. The users have just an access to
the service. As for example, a consumer can use personal care services or Medicare services
or can use a hotel room or swimming pool, however the ownership rests with the providers.

SERVICE DELIVERY AS A SYSTEM

When talking about our service delivery system and doing the business plan, we
have to determine how the service is going to be delivered.  What processes are we going to use to
deliver the service?  What kind of equipment facilities are we going to use, recognizing that we are
going to produce the service and deliver it simultaneously?

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Running a successful service company should be synonymous with delivering

excelling service. The design of the service delivery system addresses the question of “how” the
service concept is delivered to target customers. A large number of factors need to be considered to
design a service delivery system. They are:
 The role of people
 Technology
 Facilities
 Equipment
 Layout
 Service Processes; and
 Procedures

 Methods of Designing the Service Delivery System:

The design of the service delivery system depends basically on the service
package desired. Thus to achieve a well balanced service delivery system, one has to get the
right coordination of the four features of the service package viz., supporting facility,
facilitating items, explicit service and implicit service. Following are the major methods widely
adopted for this purpose.

1. The Product-Line Method: In this method, routine services are provided in a controller
environment to ensure consistent quality and efficiency of operation. For example, the
famous McDonald’s Burger or KFC outlets, the World over, follow this method. This
approach to service system design attempts to apply a successful manufacturing concept
into the services industry.

2. Customer Involvement: Depending on the degree of customer involvement, a spectrum of

service delivery systems is possible, from self-service to total dependence on a service
provided. For example, consider the services of a real estate agent. A person interested in
selling his house, can do in on his own or can pass the job to a real estate agent without
himself being actively involved. For the successful implementation of a strategy that
smoothens demand, the cooperation of the customer is very much required i.e. the
customer must match their order timing to that of service availability. In case of failure to
spread out demand, high capacity utilisation can still be achieved by convincing the
customer to wait for the service.

3. Customer Contact: In case of customer contact, the service delivery system can be
divided into high and low customer-contact operations. The low-contact service tasks such
as back-office tasks can be run on the lines of a manufacturing unit to achieve greater
efficiency. This separation of activities can result in a customer perception of personalised
service, while in fact, achieving economies of scale through volume processing.

4. Walk Through Audit: This is basically a tool used by the management to see whether the
service delivery system is matching with the customer’s expectations. A walk through
audit is a service environment audit and can be used for the systematic evaluation of the
customer’s view of the service provide. This audit consists of a set of questions on various
issues right from the customer approaches the service firm, enters the parking area, walks
to the service firm, interacts with service providers, and finally departments.

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The customer is very much a part of the service process and his perception of
the quality of service provided is influenced by what he serves and feels. Customers often
notice cues, which the management may be overlooked. A walk through audit can help the
management to come up with a delivery system consistent with the customer’s
expectations. It helps management to tangibilise the service by giving the customer,
environmental, sensible and service cues that define the service for the customer. This can
encourage the customer to visit again and provide good word-of-mouth publicity for the
firm.

SERVICE FACILITY DESING AND LAYOUT

Service operations can be affected directly by the design of the facility. Good
design and layout enhance the service, from attracting customers to making them feel more
comfortable to ensuring their safety by providing adequate lighting, fire exits, and proper location
of dangerous equipment. The physical environment or servicescape of the supporting service
facility influences both customer and employee behaviour and should be designed with an image
and feel that is congruent with the service concept.

 Service facility Design and Layout:

Service facility layout will be designed based on degree of customer

contact and the service needed by a customer. These service layouts follow conventional
layouts as required. For example, Hospital service is the best example for adaptation of
process layout. Here, the service required for a customer will follow an independent path. The
layout of hospital is shown in following figure.

Fig: Layout for hospitality service

 Factors Influencing the Service Facility Design and Layout: Service facility design and
layout is influencing by the following factors:

 Nature of the Service Firm and its Objectives

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 Availability of Land and Space Requirements

 Flexibility
 Aesthetic Aspects
 Factors Related to the Society and the Environment

 Nature of the Service Firm and its Objectives: The nature of the basic service being provided
should be kept mind while laying down the criteria for design. For example, a ban must have a
strong room where its main vault and safe deposit vaults can be housed. A doctor’s cabin must
afford some privacy to patients.
 Availability of Land and Space Requirements: Often the land that is available for service
facility has its limitation such as cost constraints and zoning restrictions. A good facility design
must keep all these limitations in mind and should make an efficient use of the available space.
 Flexibility: Flexibility demands that service firms be dynamic in nature so as to be able to
adjust to variations in the quantity and nature of demand. Incorporating a flexible facility
design implies designing for the future and can lead to financial savings and competitive
advantage in the long-run.
 Aesthetic Aspects: An Aesthetically appropriate environment has a soothing effect on the
customers as well as the employees. This affects the consumer’s perception and behaviour and
can lead to repeat visits.
 Factors Related to the Society and the Environment: The design of a service facility attains
great significance when it is going to have some impact on the society and its environment. For
example, location of a garbage depot in the vicinity of residential houses can create major
problems for the Municipal Corporation. Pressure is bound to come from the local residents for
shifting the depot. Thus it is essential that a service facility design should be such that it gains
acceptance from the society.

HRM ISSUES IN SERVICE MARKETING

With the rise in service sector industries all around the world, Human
Resource managers need to step up to the role in this fast – paced world. Interactive service skills
are needed for the smooth and effective running of an organisation. Employees who possess the
right ‘people skills’ are bound to make a positive impression on the client which in turn encourages
them to conduct more business. With the growth and rise in technology and world
interconnectedness, the service sector employs a large number of people in most economically
developed countries.

It can be rightly said that the service industry involves more contact with
people than the other sectors like manufacturing. The service industry involves the day to day
dealing with customers and clients alike. With the huge role the service industry plays, it is
necessary to for the organisations to know how to manage people to get efficient and orderly
service.

 HRM Issues:
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 Recruitment and Selection: One issue that comes to the forefront in managing people in
the service sector is the recruitment and selection of staff. Managing people in the service
sector is becoming more challenging as organisations have to look for the right people who
possess not just qualifications but the right ‘attitude’ and ‘people skills’. There is a rise in
the demand of ‘social skills’ and ‘personal characteristics’ in the frontline service.
Recruitment and selection in this context relies heavily on social skills rather
than technical skills as there is a need for employees to interact well with the clients to
fulfil the demand of the business. It has become increasingly important for managers seek
to get the right person that will ‘fit the part’. Not necessarily based on experience but also
on personality traits.
Getting the right applicant for the job consumes time and costs a lot. High
recruitment costs are part of the issues that managers have to constantly tackle with as it
takes constant time and effort to get the right candidate for the job. It is important for
managers to discern how to choose the right people to avoid a high turnover.

 Training and Development: A critical issue in service organizations may be to retain

service employees in general, and specifically those employees who are talented in
working with customers and delivering excellent service quality.
After the recruitment and selection process, managers are faced with the task
of retaining the best employees. They have to retain them by constant training and
development. Can soft skills which are needed for the frontline service be trained?
Frontline service industries require ‘people skills’ and employers are faced with the
dilemma of training people for frontline service. With the rise in the use of aesthetic skills,
managing the frontline workforce is proving more demanding. Employers feel the pressure
not only is selecting and recruiting the right employees for the job but to keep on training
them. There is a need for organisations to invest in training for their front-line employees
as these are the first people customers or clients come in contact with.
It is the employer’s responsibility to increase the motivation of employees by
guiding them through the organisations’ vision and long term goals. There should also be a
chance for career development. The need for excellent customer service for the success of
the organisation should be outlined effectively. There is a need to invest in staff training and
development. The employees should be given a chance to make decisions regarding their
service to customers. Having a robotic form of work does not motivate the employees to put
in their best effort. Reward systems to keep the best employees.

BUILDING SERVICES ASPIRATIONS

Aspirations make the ways for the generation of demand. Aspirations pave
the avenues for the offering of quality services to the users. The aspirations may be generated in two
ways namely, generating aspirations to serve the users and generating aspirations to use the
services.

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If we talk about the service aspirations of organisations engaged in

generating the services, our emphasis are on the offering of quality services. And when we make an
advocacy in favour of the service aspirations of users, our focus is on the creation of demand,
expansion of market and tapping of the market potentials. The service generating organisations
while formulating strategies need to build service aspirations so that the process of demand
generation gains momentum. It is not only sufficient that they formulate a sound marketing plan. It
is much more impact generating that they build up service aspirations so that the employees
engaged in offering the services make available the users the promised services. It is against this
background that we find it significant to focus on the service aspirations. The professionals working
in an organisation bear the responsibility of building the service aspirations. We can't negate the
fact that with the development of corporate sector and a strong emphasis on the services sector, it is
high time that the service generating organisations make sincere efforts to build up services
aspirations.
At the outset, we talk about the service aspirations of an organisation where
the employees engaged in offering the services are supposed to work with the motto of offering
quality services to the users. In a majority of the cases, we find that the policy makers promise the
services and make a provision for the world-class services but due to the lack of employee
orientation vis-a-vis the work culture, a gap between the services-promised and services-offered
remains existent. The employees serving an organisation lack training; the policy makers fail in
initiating employee orientation and resulting from which the promised services never reach to the
users. If the employees are not interested in serving the users, this is due to the fact that the policy
makers vis-à-vis the professionals have not assigned due weightage to the development and
motivation of human resources. The training facilities are inadequate, the policy decisions are not
proactive and the professionals are found disinterested It is clarified in the figure that building of
service aspirations requires employee orientation. If the employees are imparted proper training
facilities; if they are motivated reasonably; we find employee orientation which engineers a sound
foundation for serving the users. Performance orientation necessitates employee orientation and the
employee orientation requires proper training and adequate incentives. If the front line staff are not
working properly; if they are deliberate in creating a gap: this is because of deficient management
and faulty policy decisions. Thus, it is pertinent that the policy makers as well as the senior
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executive realise the instrumentality of building the services aspirations and plan to train and
motivate the employees in a right fashion. The executives bear the responsibility of translating the
plan into action which makes a strong advocacy in favour of professional excellence.

The building of service aspiration also draws our attention on the potential
users or the prospects. Here, our emphasis is on creating aspirations among the prospects so that
they appear interested in using the services-offered by an organisation. The innovative promotional
measures simplify the process of building service aspirations among the prospects or customers.
Unless you aspire, the process of demand generation can't be activated. Thus, an important problem
before the professionals is to switch on aspiration by activating the aggressive promotional devices.
There is no doubt in it that with the development of corporate culture, we find change in our
lifestyles which have been found constructing a base for using the services of different types of
organisations. The professionals if evince interests in switching on the process, the task is not much
more difficult. For example, the banks and other agencies have been issuing credit cards. The
service aspirations at the end of an organisation are well managed because the employees are found
promoting the same. Here, it is important that the professionals sensitise prospects with great
fashion so that they aspire for using the credit cards.

It is right to mention that building of service aspiration is essential. Of late,

we find development of service generating organisations and a number of quality services are found
available in the market. The prospects in a majority of the cases are not aware of the new
developments. Of course, they have desire, capacity but aspirations at the very nascent stage. They
fail in making demand and the opportunities are lost. We can't negate the fact that prospects of
today are the customers of tomorrow. If we make sincere efforts to understand their aspirations, if
we make initiative efforts to transfigure their aspirations into demand; the process of demand
creation is only not activated but keeps on moving for the years and years to come.

TRACKING CUSTOMER BEHAVIOUR

Consumer behaviour is the study of how individual customers, groups or

organizations select, buy, use, and dispose ideas, goods, and services to satisfy their needs and
wants. It refers to the actions of the consumers in the marketplace and the underlying motives for
those actions.
The study of consumer behaviour is concerned with all aspects of purchasing
behaviour – from pre-purchase activities through to post-purchase consumption, evaluation and
disposal activities. It is also concerned with all persons involved, either directly or indirectly, in
purchasing decisions and consumption activities including brand-influencers and opinion leaders.

 Pre-purchase Activities: When a consumer realizes the needs and wants, he goes for an
information search. He does the same, so that he can make the right decision. He gathers the
information about the following:

 Service Brands
 Service Variations
 Service Quality
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 Service Alternatives

The consumer can gather information from various information sources. The
information sources are of two types which are listed under:
i. Internal Sources − Internal sources includes the consumer himself. Here he himself recalls
the information that is stored in his memory and uses his experiences.
ii. External Sources − External sources of information include all sorts of interpersonal
communication with the external environment such as friends, family, marketing people,
through advertisements, and word-of-mouth communications, etc.

 Post-Purchase Behaviour: All the activities and experiences that follow purchase are included
in the post purchase behaviour. Usually, after making a purchase, consumers experience post-
purchase dissonance (difference). They sometimes regret (disappoint) their decisions made. It
mainly occurs due to a large number of alternatives available, good performance of alternatives
or attractiveness of alternatives, etc.
A high level of post-purchase dissonance is negatively related to the level of
satisfaction which the consumer draws out of product usage. To reduce post-purchase
dissonance, consumers may sometimes even return or exchange the product. For satisfied
customers, post purchase actions include repeat purchases, customer loyalty and positive word-
of-mouth communications.

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